Nogood Boyo: a simple VAT Question

"Troy Steadman" wrote

No, unless you decide you want to opt to waive exemption on the property. You would do this is your customer is VAT registered, and someone selling cars almost certainly will be.

You are giving the VAT Expert's answer here, there is a much simpler Chartered Accountant's answer which doesn't have the potential for calamatous consequences that your answer has.

I'll cross-post this to uk.business.accountancy and see what Peter Saxton makes of it. No two Chartered Accountants ever agree on the same answer, but is not surprising because no two of them will have had the same experiences on which to base their advice.

The answer to this question didn't come from from a deep understanding of VAT (particularly) it came from a general understanding of how problems occur and what sorts of things are best avoided.

I know he's kill-filed me, perhaps someone can repost it so he reads it.

I was only ribbing you and I didn't mean to offend. I have been thinking about solicitors a lot recently. In a solicitor's office you have someone who deals with Family, someone who deals with Conveyancing. Phone the Family bloke and ask about Conveyancing and he won't speak to you, you'll have to phone back and speak to Conveyancing.

In a Chartered Accountants office it is very different. There are all kinds of experts, a Tax expert (very often a former Inspector of Taxes), in a larger office there will be VAT expert. That would be you, highly trained, highly motivated, highly paid, highly valued, always there with the correct answer at his fingertips. But there is one person over and above all these experts, the CA himself. He doesn't have the depth of knowledge of any of them but he has the *breadth* of knowledge that you need to give correct financial advice. Here's a question that came into me when I was alone in the office. I gave what I believed to be the correct answer and got in big trouble for it ? the CA took 3 seconds to utterly refute it:

"I have a very large garage in a West London Suburb and am VAT registered. Someobody wants to rent part of the forecourt to sell cars, should I charge him VAT?"

"Troy Steadman" wrote

Go on, I'll bite - *what* "calamatous consequences"?

Okay "calamatous" is a bit strong. A problem which might cost his client thousands of pounds during an event which is certain to happen.

On the "if you can't join 'em, beat 'em" principle?

Rent is VAT exempt, isn't it?

If that's the wrong answer, I expect you'll be jumping with glee because you gave the same one.

You are not even answering the right question Ronald. My answer was fundementally the same as Jonathan's:

"No, unless you decide you want to opt to waive exemption on the property. You would do this is your customer is VAT registered, and someone selling cars almost certainly will be."

I can tell you that this CA never forgave me for what he regarded as the utter stupidity of my answer. I've been thinking about it today walking round the shops and it *is* utterly stupid.

1) What does it do that we might one day wish we could undo when it becomes a big issue which affects a crucial decision. 2) What do you see when you walk past a Garage with cars sitting on the forecourt?

"Troy Steadman" wrote

What is/are the biggest event(s) in the cycle of a business that is trading?

What might happen to a garage when this decision is made and why could Jonathan's advice seriously affect its outcome and lose its proprieter thousands of pounds or even scupper the transaction(s) completely?

It gets worse Tim:

All of us are being led by the nose by the stupidity of the question into matching it with our equally stupid answer. What is the *real* question?

I give up.

Arthur Daley?

Do you not think that when you come to sell the business and you are discussing with developers who represent Factory Builders, House Builders, Charitable Day Centre Builders that the issue of whether the business is partially exempt for VAT or has opted to tax might become an issue?

In the first 2 seconds of the time it took this CA to work out the answer I would imagine the words "partial exemption" flagged up and he thought (instinctively) "Best avoided for the time being, could be useful later"

If a garage owner said to you: "I've got this bloke wants to flog some cars on my forecourt, what's the best method of settin' it up mate?"

I don't think you would say to him:

"Well the best thing to do is to *rent* him some space".

Wouldn't you charge him commission or something like that?

So the answer to this question which is the *real* question being asked and which the CA saw immediately but which the rest of us were led by the nose into missing is the blindingly obvious:

"You call it something else!"

You're thinking of when he sells the place?

There aren't many garages earning below the registration threshold.

Oh yes I would.

Most certainly not. That way I collect my rent no matter how many cars he sells. If he does really well, I can always increase the rent.

If he sells few, or at too small a mark-up, or if he fiddles the books in the case of "used fiver" deals, he can fiddle me out of my commission. At least with rent I know where I stand.

I think you may have missed the point of this one Ronald. The tuppence rent is not the issue, it's the multi-million pound deal that is the issue, money changing hands is money changing hands, whether it's commission or rent, who cares!

You may be right. I still don't see one.

What multi-million pound deal? The cars? Surely not. They're not mine. Often they're not even the dealer's, but they might be. So he's making his money either out of commission or from a normal trading mark-up. He will earmark a fraction of that to pay for my land. I'm not in the business of selling cars, and have no interest in investing in his venture. I don't care how much or little profit he makes. I'd prefer a steady rental income to a her-today gone-tomorrow cut of a fiddled profit.

Are you being serious? The multi-million pound deal is the selling of the Garage to a developer who may be developing property for an Exempt business such as a Charity or for a Taxable business such as a Factory.

It could be scuppered or damaged if the Garage is/is not Exempt/ Option-to-Taxable. The CA didn't AFAIK consider the ramifications, he just knew it was an area that if there was no need to stray into it it would be good area to stay away from.

Sounds like rubbish to me. If selling to a developer you'd sell the land, not the business. VAT status should be irrelevant.

Over to Nogood Boyo.